Elon Musk testified Monday that not only was he confident he would get the backing of Saudi financiers to take Tesla private in 2018, but that he could have sold enough shares of his rocket company SpaceX to make a buy-out. out to finance.
Musk defended himself as part of an ongoing lawsuit against the CEO for allegedly defrauding investors by tweeting on August 7, 2018 that he received funding to take Tesla private at $420 per share and that “investor support is confirmed.” Tesla’s share price soared after Musk’s tweets and later fell when it became clear the buyout would not go through. Investors say they lost millions as a result of Musk’s tweets.
While Musk could lose billions of dollars in damages if he loses the case, what is really at stake for the richest man in the world is his reputation for truthfulness and looking out for his investors.
In a federal court in San Francisco, Musk doubled down on his belief that he had verbal confirmation from the Saudi Arabian Public Investment Fund (PIF) to take Tesla private. Musk testified that the fund was “catching up” on his commitment. He also acknowledged that no acquisition price had been discussed with PIF representatives.
Even without the PIF money, he “felt the funding was secure” with SpaceX stock alone. Musk nodded toward his sale of Tesla stock to buy Twitter, saying he would have considered doing the same to go through with the deal to take Tesla private.
Plaintiff’s attorneys countered that since Musk’s statement from last year did not contain any reference to the sale of SpaceX stock, today’s inclusion of that point was constructed in hindsight.
Musk’s attorney, Alex Spiro, also pointed to Musk’s ability to “raise more money than anyone in history,” according to Musk, which would also have supported the executive’s claims that funding had been secured .
A nine-person jury will decide whether the CEO artificially inflated the company’s share price with his tweets about the buyout, and if so, by how much. U.S. Judge Edward Chen ruled last year that Musk’s post was false and reckless, which could influence the jury’s opinion.
Musk says he’s trying to do what’s best for investors
Musk and his lawyer also argued that he was not trying to scam investors, but actually wanted to take some of them with him. Tesla’s hard-core base of private investors — like the plaintiffs in this case — is important to the company. But the SEC does not allow private investors to invest in private companies.
“So the concern would be if Musk took this company private, could the person who owns two shares of Tesla and has a low-paying job continue to be an investor? Because the company has a very loyal private investor fan base of people who buy Tesla products and believe in Musk,” Josh White, an assistant professor of finance at Vanderbilt University and former financial economist for the SEC, told businessupdates.org.
During the trial on Monday, Musk gave details of certain special-purpose vehicles available to SpaceX investors — SpaceX is a private company — which Musk supposedly wanted to replicate with his private deal with Tesla.
“Musk was trying to say that they could invest in some sort of special purpose vehicle, maybe small investors can get together in something that looks like a fund, and then invest that fund in a private Tesla,” White said.
White noted that these types of vehicles are not always good for investors because it gives them less liquidity.
In any event, plaintiff’s attorneys demonstrated through evidence from Goldman Sachs and other investors that there were limitations to involving private investors in a private Tesla.
While in the stands, Musk also framed his tweets about an incomplete deal as an attempt to engage shareholders in his considerations of taking the company private. He said he was concerned that the Financial Times knew about the Saudi’s possible investment in Tesla and Tesla’s private deal, and leaked the information before Musk himself had a chance to tell shareholders.
“I was worried that shareholders would think I was trying to exclude them,” Musk said. “And I want it to be clear that I was trying to support them”
“The $420 price point was no joke.”
The U.S. Securities and Exchange Commission also investigated Musk’s tweets, leading to a $40 million combined settlement from him and Tesla, and a requirement that a Tesla attorney review Tesla-related tweets in advance, something Musk later argued against. tried to appeal.
The SEC alleged that Musk completed the buyout offer from $419 to $420 per share as a reference to the weed culture, which the agency says would be funny to Musk’s girlfriend.
Musk denied this, saying it was a coincidence that $420 is also a reference to Weed Day, which falls on April 20.
“It was chosen because it was a 20% premium to the share price,” Musk said. “The $420 price point was no joke.”
Musk also testified briefly last Friday, telling jurors he didn’t believe his tweets affected Tesla’s stock.
“Just because I tweet something doesn’t mean people believe it or will act accordingly,” Musk said.